The chief executive of Impala Platinum (Implats) said its Zimbabwe operations would be severely hampered if it met government demands to transfer majority ownership to local black investors.
Foreign mining houses are scrambling to submit plans to surrender 51 percent stakes in their local operations to local blacks, a move the government says is needed to rectify colonial-era imbalances.
“In essence if you were to look at 51 percent equity with the current operations you could probably limp along, but would you be able to expand?,” David Brown said in an interview with Reuters after the group unveiled its annual results, which showed a 41 percent surge in earnings, Reuters reports.
Analysts see the Zimbabwe threat as a way to squeeze more funds out of the companies tying to build operations in the country with the world’s second biggest platinum reserves after South Africa.Zimababwe,
Zimbabwe’s government likely does not want a takeover because the impoverished state does not have the money to buy controlling stakes in foreign mining firms. It neither has the money or expertise to run mines, where production will almost certainly dwindle under government control.
Foreign firms may be playing a waiting game in the country run by the 87-year-old Robert Mugabe, looking for a future government more amenable to international investment before they ramp up production, analysts have said.
But they also risks losing rights to claims, especially with the country giving greater access to mining firms from its biggest international benefactor and long-time ally China.
Implats’ Zimbabwe unit Zimplats had its proposals on the issue rejected and Zimbabwe’s Empowerment Minister Saviour Kasukuwere, who wrote to the company on August 17, directed it to offer a revised plan within 14 days.
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“The way I see it is, he’s given us a challenge … 14 days is quite a short amount of time considering what we have to achieve but we want to engage with him in the time frame,” Brown said.
Brown flatly said earlier the policy could not work.
“This is not me David Brown making up this story that 51 percent doesn’t work. Anyone can put their slide rule across the numbers and 51 percent equity does not work,” he told Reuters.
“The 51 percent equity we feel quite strongly that it’s just financially not possible to put in the large amounts of capital that are required with the right risk/reward process.”
Brown said part of the problem was people are seeking fast returns when commodity prices were hot.
“Mining requires lots of capital and returns over many years … You don’t get instant gratification for mining”.
Implats is the world’s second largest platinum producer and has a lot riding on Zimbabwe as Zimplats accounts for about 10 percent of its global production, which came in at just over 1.83 million ounces of platinum in the last financial year.
Brown said he was frustrated that previous agreements which were said to be “empowerment credits” were not being honored by the government or that the value or viability of the land that the group ceded was being called into question.
Among such deals, Zimplats reached an agreement in Zimbabwe in 2006 which saw the firm releasing claims amounting to 36 percent of its resource base in one area.
The firm said the market value of the released ground was $153 million. The release of the claims was in exchange for empowerment credits and cash, Zimplats said at the time.
